Can one rent from his incorporation?

Leveraging, renting vs owning, making an investment or buying a home?
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mragile
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Can one rent from his incorporation?

Post by mragile »

I am just starting out and I am hoping to maximize my spending/saving without doing ANYTHING illegal.
I plan to incorporate my practise and intend to buy real estates.
Is it possible/legal to be a tenant in one of these properties and pay rent? I haven't quite thought it through but I wonder if it will loosen up some cash I would have used for down payment on a home for investing.
What do you guys think?
twa2w
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Re: Can one rent from his incorporation?

Post by twa2w »

Are you planning on renting a space from your corporation for your professional practice? Or for your personal residence.

If for your practice, most professionals have a separate corporation to hold realestate, including space they rent to their professional Corp. In fact the Corp that holds the real estate is often owned by the spouse.

This keeps liability issues clear as well as income and tax issues.

How this is set up may depend to some extent on what province you are in,whatprofession you are in and your marital/ children status.

In some cases your professional Corp may own the building your practice is in but this is rare.

Best to find a good accountant and lawyer and listen to their advice. Youwill need good advisors.
Remember to that whatworks best when starting out, may not be good advice once you are more established.
mragile
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Re: Can one rent from his incorporation?

Post by mragile »

Thanks twa2w.
I plan to rent as residence.
twa2w
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Re: Can one rent from his incorporation?

Post by twa2w »

You can rent from your own corporation if you like. Just don't put the real estate in your prof Corp.

Again a good lawyer, accountant are good to cultivate early for good advice.

I am not sure whether renting from your own Corp will save you any money though. You may want to check requirements re non arms length transactions btween yourself and corporation viv a vis amount of rent required if any.
mragile
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Re: Can one rent from his incorporation?

Post by mragile »

Thanks.
What do you mean by not putting the real estate in my prof corp?
Yeah, I plan to discuss this with my accountant but it never hurts to have some input from others.
twa2w
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Re: Can one rent from his incorporation?

Post by twa2w »

Not sure what your profession is or what prov you are in - rules are different depending on each.

What happens if a visitor to your home falls on your sidewalk and is severely injured. He sues you and the owner of your home, your prof Corp.

Yes your company liability insurance may cover you. Or may not as the activity was not not professionally related. Your house insurance may also cover you.

But you may have to report all this to your professional body. It may may restrict your ability to operate., they may want regular reports and audits of accounts. If the claim is large enough you and your prof Corp may have to declare bankruptcy which could impact your professional licensing.

I had something like this happen to a client/acquaintance of mine in Ontario. Different circumstances but he was an architect. We did everything we could to avoid bankruptcy for him but bottom line is he had to go that route. He could no longer work on his own as an architect. He could be an employee for some else but with some restrictions for something like 7 years. Big blow to both ego and income.

Rules maybe different now but you need to check accounting, legal and professional ramifications of this.

Generally it is recommended to keep prof Corp as proffessional activities only. Keep investing separately even if buying office building for practice. Lots of professionals even used to have their spose incorporate a company to manage the office and staff of their practice, effectively splitting income. ( and one more barrier)

Note, I am retired and my information and experience is a little old so take it for what it is worth. I have also seen folks who do hold investment, residential property in their prof Corp and they have no issues but for the few bucks it saves them on accounting, I think they are penny wise pound foolish as the english say.

Cheers
mragile
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Re: Can one rent from his incorporation?

Post by mragile »

Thanks you very much.
Sorry its coming so late. I have been off.
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